Bulls Get Stellar Report on Gold and Silver

By John Cassimatis  FEB 07, 2013 12:25 PM

My usual checklist of five points to consider when thinking about the precious metals points to a bullish case.


It’s been a while since I’ve written about the metals, and that’s because I expected a whole lot of nothing.  And that’s basically what we’ve got here.  The consolidation from its August 2011 highs rolls into its 8th month.  I have to admit -- I am getting excited.  Let’s lay out the bullish case for gold in an orderly fashion.

These five items make up my usual checklist of points to consider when thinking about gold and silver’s future direction.
This is probably the best report the bulls have gotten in a long while. Many say that a correction is a function of both time and price. I strongly agree with that statement. Now that the metals' "time" category has finally shifted to the bulls is huge here.  Believe me, the same tailwinds for the metals exist.  We are still printing over half our annual deficit.  Global currency debasement is in full swing.  US leadership (kicking the can down the road until a crisis moment) and fiscal deficits (surmounting debt in the context of a trillion-plus more per annum) continue to roar like a lion.  (Wow, I began writing this article at 1665 and now gold has rallied back....)

What could go wrong? The only thing that worries me slightly are the bonds.  While we all know that rising yields is a necessary precursor/catalyst for a parabolic metals market, the initial move higher could provide a knee-jerk negative reaction as real rates of return (based on government formulas) inch into positive territory.  While I worry about this, I also think the rise in rates is going to take longer than everyone thinks it is.  Perhaps gold can make its run to 2400 first and then suffer the pain of that adjustment.  At this point, I am not going to overthink something that hasn't happened yet, and in Japan, 20 years in, still has not occurred. Just file that concern for now.

1698 gold, 32.125 silver.  Those are the prices.  I have long positions ahead of those prices and I assure you I will be taking purchasing power to a very low level on their penetration. Of this I am sure.
No positions in stocks mentioned.

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